Ratan Tata to restore order after Cyrus Mistry's chaotic ouster

Spokespersons say the interim chairman, Ratan Tata, has already exhorted leadership of the companies to focus on their respective businesses, without being concerned about change in leadershipSagar Malviya&Kala Vijayraghavan | ET Bureau | Updated: October 31, 2016, 10:18 IST

Ratan Tata, who took over as the interim chairman of Tata Sons after Cyrus Mistry’s ouster last week, will “take a relook at strategy” to drive growth, the group’s spokesperson has said.

Tata Sons, the conglomerate’s holding company, posted a 67% drop in profit to Rs 3,013 crore in the year to March and 39% fall in revenue to Rs 8,104 crore on a standalone basis, according to Registrar of Companies filings last week. But, on a consolidated basis, Tata Sons’ profit rose to Rs 23,119 crore from Rs 19,180 crore a year ago.

The standalone revenue or topline performance for fiscal 2015-16 is somewhat skewed by the higher dividend paid by TCS in the previous fiscal, 2014-15. In that year, TCS paid a dividend of Rs 11,450 crore, including a special dividend of Rs 5,774 crore, inflating the base year's revenue. TCS contributed about Rs 8,571 crore as dividend in FY16 to Tata Sons, which owns a 73.3% stake in the technology firm. Nearly a dozen overseas subsidiaries of TCS paid dividends of Rs 633 crore as well Excluding the special dividend of an additional Rs 5,574 crore in FY15, Tata Sons’ revenue would have risen 9% (rather than a 39% fall), while net profit on a standalone basis would have fallen 8% in FY16.

The Tata Sons board sacked Mistry as chairman on October 24 citing the group’s long-term interest, nearly four years after putting him at the helm. Mistry and his family own nearly 18.3% of Tata Sons, while about 65.2% is held by Tata Trusts.

Tata Sons' standalone revenue or topline includes dividend from group companies and brand equity subscriptions. There’s no difference between standalone revenue and consolidated. It’s only the profit that is different. On a consolidated basis, Tata Sons’ profit depends on the performance of 223 subsidiaries and 41joint ventures and the yield on equity investments.

For instance, Tata Motors contributed RS 2,581crore in FY16, compared with a significant loss of Rs4,738 crore in FY15. The interim chairman has told company bosses they shouldn’t be distracted by recent developments and concentrate on improving performances, said a group spokesperson.

“The interim chairman, Ratan Tata, has already exhorted leadership of the companies to focus on their respective businesses, without being concerned about change in leadership,” the spokesperson said.

“He has asked Tata companies to focus on profitability growth and enhancing shareholder value, and on their market position vis-à-vis competition rather than comparing themselves to their own past. He has said the drive must be on leadership rather than to follow.”

In FY16, TCS, the country's largest software services firm, boosted its dollar revenue 7% to $16.54 billion, the slowest pace in five years. Its net income rose 14.8% to $3.69 billion from a year ago.